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The Importance of Clarity in Language for Commercial Contracts

Posted by M. Margaret Gonsalves-Sabola | Oct 01, 2018 | 0 Comments

The importance of clarity in language for commercial contracts 460x260 c

The importance of clarity in the language used in commercial contracts cannot be overstated. Even one unclear word or ambiguous phrase could lead to contentious litigation. When companies negotiate contracts, their representatives should take special care to avoid ambiguities and uncertainties in the contract language.

Examples of Unclear Language

  • Close of business
  • 5:00 p.m.
  • 15 days after the goods are delivered
  • $15,000 dollars
  • Best quality
  • Payment will include expenses for shipment

Why the Language Is Unclear

The phrase “close of business” could mean a variety of times depending on the business. Most businesses close at 5:00 p.m., but some close earlier and others close later. The contract should specify exactly when close of business is or refer to an outside source for determining the time (such as the posted hours on the company's website as of a certain date). Similarly, times such as 5:00 p.m. should include a time zone, such as EDT. This is especially important for businesses operating in more than one time zone.

The phrase “15 days after the goods are delivered” lacks clarity because days could mean business days, calendar days, or something else. The meaning of business days varies by company and industry. The contract should specify calendar days or make clear which days are excluded from the time limit. Amounts of money should specify which currency, such as BS $15,000. Again, this clarification is especially important in international contracts, when companies could use more than one type of currency.

Phrases such as “best quality” or “payment will include expenses for shipment” allow for ambiguity when companies perform under a contract. Best quality could take on a variety of different meanings depending on the contract and the industry. The contract should state what best quality means: no scratches or dents, sealed packaging, etc. Here the parties could reference a set of established industry standards for what best quality means. Finally, terms like “include” raise the question of whether anything else is included. Payment could include not only expenses for shipment, but also the cost of the items and money for the delivery.

How to Make Your Contract Clear

Contracts should avoid ambiguous language, aiming to clearly specify the deal that the parties intend to make. Avoiding unclear phrases like those described above is the first step. You should consult a qualified attorney with knowledge of contracts for help reviewing your contract.

To find out more about interpretation of commercial contracts, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.

About the Author

M. Margaret Gonsalves-Sabola

M. Margaret Gonsalves-Sabola is a civil and commercial litigation attorney and an accredited civil and commercial mediator. Margaret has over 21 years' experience in legal practice in the United Kingdom, Jamaica and The Bahamas.

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